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           Vol 3: June 2009                                             Large Taxpayers Office

                                            NEWS DESK
  In This Issue                         The launch of PAYE e-filing brings to     actions necessary to counter such
                                        four the number of tax filing service     risks.
                                        menus available electronically. Other
  •       Online services brief         modules    launched     include   e-      The Authority also plans to further
                                        registration and e-filing for normal      consolidate operations by strengthen-
  •       Corporate Plan                and withholding VAT.                      ing regional offices with the eventual
  •       EA tax harmonization                                                    aim to segment tax administration
                                        Arrangements for the launch of e-         based on regions. This move may see
  •       Technical briefs              filing for annual income tax returns      traditional    revenue    departments
                                        are at advanced stage and pilot test-     replaced with region based structures
                                        ing has commenced with up to 130          with the head office playing a largely
                                        KRA staff members having filed            supportive policy making and monitor-
                                        their 2008 returns electronically.        ing role.
Online services                         The envisaged June 09 roll out date
                                        will however not be achieved as more      The proposals contained within the
                                        testing is needed before the system       4th Corporate Plan serve to underline
Following the publishing of the
                                        is opened up for public use. Taxpay-      the now clear reality that for the KRA,
Finance Bill 2009, work has already
                                        ers are therefore advised to file the     change and more change seems to have
commenced to develop regulations
                                        annual returns in the normal manner.      become the key constant.
to entrench the requirement for
electronic filing of returns. The
proposed framework aims to require      4th Corporate Plan                        East Africa tax harmonization
specified categories of taxpayers to    Work to conclude the 4th Corporate     The East African Community (EAC)
file returns electronically with        Plan is in high gear with its unveilingSecretariat with the assistance of the
appropriate safeguards provided to      expected later this month. The 3-year  GTZ has commenced a study to
mitigate against data interception,     plan seeks to deepen the reform        develop a framework for harmonisa-
penalties occasioned by system and      culture with a number of initiatives   tion of Domestic Taxes within East
other failures on the KRA side. It is   geared towards re-engineering of       Africa. The harmonisation of Domestic
expected that the rules will be pub-    technological and structural processes Taxes is anchored within Article 83 of
lished in July 2009 to take effect      and further enhancement of human       the EAC treaty which binds the Part-
within a period not exceeding ninety    resource capability.                   ner States to take measures to harmo-
days.                                                                          nize tax practices in order to improve
                                        A key focus of the plan is the the business environment within the
Additionally, a new milestone is        entrenchment of the functional envisaged Common Market.
about to be covered with the            organisational structure with plans to
planned roll out of online filing       integrate crucial processes such as Among the issues being considered
services for PAYE with effect from      audit and risk management with a view include the priority areas and the
1st July 2009. In June, twelve tax-     to better achieving the “single view” approach to harmonisation with a
payers successfully filed their May     concept. In respect of the latter, the choice between separate and unified
09 returns using the recently           KRA plans to establish a formal tax legislation. A team of consultants has
launched PAYE filing module with        risk management role to spearhead already commenced the information
more testing planned within the         the study of risks inherent in tax collation process with the Kenyan visit
month.                                  collection processes and the response     News Desk Contd. on back page
                                       NEWS DESK (Contd.)
targeting key players including Trea- give the system satellite capability so as                               Revenue Authorities meet
sury, KRA, AG‛s department and to facilitate real time tracking including
business associations.                carriers that deviate from the planned                                   The 26th East African Revenue
                                      route.                                                                   Authorities meeting held in Nairobi
The EAC Common Market is The Customs department commenced use                                                  in May discussed the intractable
expected to come into effect in 2010 of the system for all transit fuel carri-                                 question of cross border smuggling
with its formal launch by the Heads ers and motor units with effect from 9th                                   and mechanisms for tackling the
of State slated for later this year.  February 2009.                                                           menace especially in respect of
                                                                                                               motor vehicles, spirits and petro-
Cargo tracking                                      Top 25 sector group                                        leum. The meeting attended by
                                                                                                               Rwanda, Tanzania, Uganda and
E-cargo tracking for domestic taxes   In a bid to improve customer service, the                                Kenya resolved to cooperation
has commenced with the initial pilot  LTO has further segmented its taxpay-                                    efforts and to seek greater
targeting     four (4) companies      ers with the creation of a Top 25 group                                  rapport with the EAC secretariat
involved in exportation business. A   comprising of the largest contributors to                                with a view to better the tax
sensitisation session was held on     tax revenue. This cream of the cream                                     reform agenda within the Commu-
17th April 2009 at which taxpayers    consists of taxpayers from varied indus-                                 nity structure.
were taken through operational        try sectors including state corporations
modalities of the system      which   but excluding government ministries. In                                  The meeting also deferred a deci-
apart from cargo tracking will also   total the group contributes 52.5 % of                                    sion on a proposal by the mobile
help track the KRA‛s widely           the LTO‛s revenue with the figures for                                   telephone industry to operate a
dispersed fleet of vehicles.          main tax heads being .PAYE (30.09%),                                     prepaid airtime scheme that would
                                      %), Other Income Taxes (22.73%) and                                      see tax on airtime sold in one coun-
The system which operates through VAT (28.19%).                                                                try but used in another transferred
wireless technology operates via an                                                                            to the country where the service
electronic tag that transmits signals Details regarding the new group whose                                    was consumed. This matter was
that get picked up by readers placed contact manager is Mr. Ronald Omulindi                                    referred to the joint technical
at strategic points thereby helping at Tel: 20 2816117 or                                                      committee for evaluation of its
pinpoint the locality of the carrier. Ronald.Omulindi@kra.go.ke are available                                  feasibility given existing legal
Upgrades being undertaken aim to at www.kra.go.ke/lto/top_25.pdf.                                              provisions

                                                                                                        NOTICE BOARD
            TECHNICAL DESK
                                                                                                                      Auditors Returns
                              TECHNICAL MATTERS
                                                                                                         We wish to inform taxpayers that the
                                    Technical Rulings                                                     requirement for their auditors to file
                                                                                                            monthly data on VAT refund claims
Excise Duty                                        Non-Residential Buildings                              audited by them is now entrenched in
Point at issue                                                                                             law. As with past practice, no refund
                                                   Point at issue
                                                                                                            claims will be entertained unless an
What is the tax point for excise tax Whether a person registered to                                         auditor has submitted the relevant
purposes and how is excisable value supply leasing, letting or hiring of                                  return covering the refund claim(s) in
determined?                          non-residential building should be                                                   question.
                                     taxed on the area occupied by him in                                We therefore urge taxpayers to ensure
Ruling                               a self-owned building.                                              that their auditors comply by providing
                                                                                                          the information required in good time.
The tax point is that at which the                 Ruling                                                     Auditors who consistently fail to
customer takes possession and title                                                                          observe this requirement will face
to the goods. In situations where                  The space occupied by the regis-                      possible removal from the list of those
goods are delivered to the customer,               tered person for their own use is
the tax point may not be ex-                                                                                    empowered to audit claims.
                                                   subject to VAT, if used for the
production line or the excise stock                purposes of activities not attracting
room and may therefore include                     VAT as provided for under Section 2                                     KRA Online
additional costs such as delivery                  (c) of the VAT Act.
expenses.                                                                                                For a step-by-step guide on how to use
                                                   Where a registered person occupies                      the KRA Online service please visit:
Excisable value includes all produc-               part of the building for purposes of                  http://www.kra.go.ke/portal/downloads
tion expenses except tax related                   which deduction of input tax is                               /manuals/KRA-Online--
ones (VAT and cost of Excise                       prohibited, VAT on the space occu-                    Services-Step-Guide.pdf. You may also
stamps).    Transport     to     the               pied will be charged and accounted                    access the latest software version for
customer‛s premises is included                    for as provided under Section 2 (h).                       the filing of VAT returns at:
except where recoverable.
                                                                                                               http//www.kra.go.ke/portal

  The Taxpoint is produced monthly by the Large Taxpayers Office to enhance communication with stakeholders. While measures have been taken to ensure
accuracy of the contents, readers are advised to consult with us on any matters touching on tax interpretation. For enquiries and contributions please contact
             the Operations Office at lto@kra.go.ke. Please visit our website at www.kra.go.ke/lto.html for more information on our operations.

				
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